After year of Covid pandemic and related restrictions, it’s time to turn a page and open a new chapter. Getting back into FinTech even if never having really left, what better way is there than having a look at recent news? Well, that’s exactly why we start today with the first installment of the FinTechnologist Weekly, a look back at the past week in FinTech with its business, technological or regulatory developments or what else could be relevant:
Crypto Tales, Busy Regulators and Closing the Back Door
Careful Where You Tread
Obviously, this has to begin with a brief pondering whether the current drop from its recent all-time high spells the end of the rally for Bitcoin and other cryptocurrencies or not. Not providing any financial advice and not putting any money into it myself, this could well be just a breather since the fundamentals haven’t changed (yet): wider market acceptance of crypto assets, (more) big investors entering the arena, inflation in the U.S. and elsewhere, and the perception of scarcity – arguments that were expressed in December 2020 before this year’s double and triplication from just under $20k to its current heights. Having said that, many of the counter arguments are still relevant and several risks apply, not least the risk of extreme volatility, so investors need to tread carefully.
The FinTech Capitol of the World
When we talk about the Fintech capitol of the world, London is certainly up there and many people will tell you that despite Brexit it still wears that crown. Arguably, you could easily accept this statement, but at the same time, Brexit has put a dent into the shining armour and it remains to be seen whether some of the aspects that helped London in its climb to the top and that as a result of the decision to leave the EU have been lost, can successfully be offset: pulling out from the EU’s free market means lesser access to a pool of very well educated resources; it also means being cut out from a large market that was at the centre of many FinTech offerings and setting up a secondary office costs money and still does not guarantee the same level of success. While it is still early days and the real impact will only become visible over time, life has become more difficult for the UK’s FinTechs. To counter any negative effects, the UK government has conducted an extensive analysis that resulted in a report on a Strategic Review of U.K. Financial Technology named the Kalifa Review of UK Fintech after the head of the working group.
It looks at how the UK became the FinTech hub of today, establishes that “the trajectory of UK fintech is at an inflection point of opportunity and risk“, because of increasing competition, Brexit and, of course, the Covid pandemic. Most importantly, the report then comes up with five recommendations, a Five-Point Plan as it is called that focuses on:
- Policy and Regulation – dynamic leadership that protects consumers yet nurtures fintech activity and encourages competition
- Skills – ensuring fintech has a sufficient supply of domestic and international talent and the means to train and upskill our current and future workforce
- Investment – completing the funding ladder from start-ups right through to IPO
- International – a targeted approach to exports and inward investment
- National connectivity – leveraging the output of fintechs across the UK and facilitating connectivity amongst them
Is this going to be the solution to ward of the danger to UK Fintech and grab those opportunities? Of course, not. Too much depends on whether these recommendations actually are filled with life and energy, yet they do not seem to be a bad starting point. Let’s keep an eye on it, shall we?
Darkening Skies over China
Talking about the junction where risk and opportunity meet, China finds itself a similar crossroads though for entirely different reasons. The WEF has published a white paper entitled “At a Crossroads: The Next Chapter for FinTech in China“. It describes a different trajectory from a time when the People’s Bank of China was separated from the Ministry of Finance in 1978 to the almost hostile environment the country’s FinTech giants currently face following their enormous growth.
The report therefore points out that “the approaches chosen by China’s financial regulators will be decisive in setting the future direction“, since “FinTechs managed to grow faster and influence the interaction between individuals and service providers more deeply in China than in most other jurisdictions“. The report concludes that a thoughtful, and collaborative approach to innovation and regulation is needed that involves all stakeholders for the country’s FinTech industry and its financial system to continue to prosper – though that’s a big revelation and true for most jurisdictions around the world…
That’s all for this week but if you have an interesting story or would join me on the FinTechnologist podcast, connect on Twitter. In any case, make sure you sign up to the newsletter to stay in the loop if you don’t mind. Thanks!
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